Rupiah–SGD Creates a New Option

Companies trading between Indonesia and Singapore have long been accustomed to using the US dollar as an intermediary currency. The practice is understandable: USD liquidity is deep, global pricing conventions are established, and many corporate treasury systems are already built around it.

Since August 31, 2026, however, Bank Indonesia and the Monetary Authority of Singapore have operationalised a Local Currency Transaction framework that allows eligible bilateral transactions to be settled in Indonesian Rupiah and Singapore Dollars through appointed cross-currency dealer banks.[1]

This does not make the US dollar irrelevant. What it does is give corporate treasury teams another option when deciding how invoices, settlements, financing and hedges should be structured.

This Is Not a Programme to Eliminate the Dollar

The framework does not require every Indonesia–Singapore transaction to abandon USD. It creates an additional route when local-currency settlement makes commercial and financial sense.[1]

That distinction matters. The right choice still depends on liquidity, spreads, hedging costs, contractual terms, payment timing and the currency composition of a company’s revenues and liabilities. Local currency is not automatically cheaper in every situation.

The Scope Is Broader Than Trade Invoices

Bank Indonesia Regulation No. 25/2026 covers current-account transactions, direct investment, eligible financing through ACCD banks and other transactions determined by BI.[2]

Current-account transactions include trade in goods and services, certain labour compensation and investment-income flows. The direct-investment category includes investments meeting a minimum 10% equity-ownership threshold, intra-group lending and capital expenditure by an Indonesian entity on a Singapore project or entity under an agreement.[2]

That makes the framework relevant not only to importers and exporters, but also to corporations with subsidiaries, investments, projects or intra-group treasury relationships in Singapore.

Hedging Instruments Are Part of the Framework

The regulation permits several SGD–Rupiah foreign-exchange transactions through ACCD banks, including spot, forward, swap, cross-currency swap and domestic non-deliverable forward transactions, subject to applicable rules.[2]

For treasury teams, that matters because currency management rarely stops at today’s invoice. A company may need to lock in a rate for a payment due in three months, bridge different cash-flow dates or align funding with liabilities.

LCT is therefore more than a payment mechanism. It creates a framework around the underlying transaction and the risk-management tools surrounding it.

Nine ACCD Banks Operate on the Indonesian Side

The appointed Indonesian ACCD banks are BCA, CIMB Niaga, DBS Indonesia, Bank Mandiri, Maybank Indonesia, BNI, OCBC Indonesia, Bank Jatim and UOB Indonesia. Singapore’s designated banks are DBS, OCBC and UOB.[1]

In practice, companies still need to discuss eligibility, documentation, limits, tenor, pricing and operational processes with their bank. The existence of a framework does not make every transaction identical.

Why Direct Quotation Can Matter

Without a sufficiently liquid direct pair, an IDR-to-SGD transaction may economically involve two conversion legs: IDR to USD, followed by USD to SGD. Each leg may introduce additional spread and exposure.

A direct IDR–SGD quotation creates an alternative route. BI and MAS say the framework is expected to increase flexibility while helping reduce foreign-exchange risks and transaction costs.[1]

The word expected matters. Actual savings depend on market depth, transaction size, timing, bank quotations and each company’s specific treasury profile.

Consider an Indonesian Importer

Suppose an Indonesian company purchases SGD1 million of equipment from a Singapore supplier. If the contract is denominated in USD, the Indonesian buyer manages IDR/USD exposure while the Singapore seller may eventually convert USD into SGD.

If the contract can instead be denominated directly in SGD, the Indonesian company can evaluate the exposure that actually matches the liability: IDR/SGD. Treasury can then compare a direct hedge against the economics of a USD intermediary route.

The direct pair will not always be cheaper. But it creates a more relevant benchmark.

Exporters Face the Reverse Question

An Indonesian exporter receiving SGD needs to decide whether to convert the proceeds immediately, hold them for future Singapore-dollar expenses or use them for another purpose.

If the same company also pays suppliers in SGD, it may be able to create a natural hedge. Instead of converting SGD into Rupiah and then buying SGD again weeks later, inflows and outflows can be matched where practical.

That can reduce unnecessary currency conversion, although it does not remove the need for careful liquidity planning.

Natural Hedges Still Have Risk

A natural hedge is not risk-free. If an SGD inflow arrives three months after an SGD payment is due, the company still has a timing mismatch. If the expected inflow covers only half the liability, the remaining exposure must still be managed.

Treasury should therefore match four variables: currency, amount, timing and certainty. Natural hedges work best when all four are reasonably aligned.

Invoice Currency Becomes a Strategic Decision

Many contracts use USD simply because it has always been the default. Procurement or sales teams may not test whether another currency would better reflect the underlying economics.

The LCT framework gives companies a reason to revisit that habit. An Indonesian buyer can ask whether a Singapore supplier is willing to quote in SGD, while an exporter can assess whether receiving SGD or Rupiah creates better margin and cash-flow outcomes.

Currency clauses become part of commercial negotiation rather than an issue left entirely to treasury after the contract is signed.

Treasury Should Enter the Conversation Earlier

In many organisations, treasury sees a contract only after price, tenor and currency have already been fixed. At that stage, the team is simply told to hedge the resulting exposure.

A more mature approach brings treasury into major commercial negotiations earlier. Teams can compare USD invoicing, SGD invoicing, direct local-currency settlement and available hedging options before the contract is final.

That allows commercial and financial decisions to reinforce each other.

LCT Does Not Remove FX Risk

If an Indonesian company earns primarily in Rupiah but owes SGD, changes in the IDR–SGD exchange rate still affect its cost base.

What LCT can remove in some transactions is the need for a third currency. The underlying exchange-rate relationship between the transaction currencies remains.

LCT should therefore be understood as a tool for structuring exposure more directly, not eliminating exposure entirely.

Singapore Matters to Indonesia’s Economy

The underlying economic relationship is significant. BPS recorded approximately US$19.17 billion of Indonesian imports from Singapore in 2025, making Singapore one of Indonesia’s largest sources of imports.[3]

Investment links are substantial as well. Indonesia’s Ministry of Investment ranked Singapore as the second-largest source of foreign direct investment in Q2 2026, behind Hong Kong.[4]

The new IDR–SGD framework is therefore attached to a meaningful base of trade, investment and corporate treasury activity.

Singapore Is Part of a Wider LCT Network

At its September 23 policy meeting, Bank Indonesia said it now had LCT cooperation with seven partner economies: Japan, South Korea, Malaysia, Singapore, Thailand, China and the United Arab Emirates.[5]

The overall value of LCT transactions had already been growing. BI reported US$11.7 billion of aggregate LCT transactions in the first half of 2025, up from US$4.702 billion a year earlier.[6]

That is not a Singapore-specific number, but it shows that local-currency settlement is becoming a more meaningful part of Indonesia’s broader financial-market development.

More Currency Options Can Add Complexity

A company that previously managed mostly USD exposure may now need to track SGD balances, quotations, hedge ratios, limits and accounting implications.

That is why LCT should not be adopted simply because it is new. The financial benefit must exceed the operational complexity it introduces.

Treasury policies should define when local-currency settlement is appropriate, who approves it and how the company evaluates hedging effectiveness.

Compare All-In Cost, Not Only the Spot Rate

Treasury decisions should not be based on one visible FX quote. The relevant comparison includes spreads, forward points, fees, financing costs, cash timing, collateral requirements where applicable and operational effort.

A route that looks cheaper at spot may not be cheaper after all components are included. Companies should therefore request comparable quotations and evaluate the full economics.

Hedging Is Not Speculation

Corporate forwards and swaps are sometimes casually described as “currency trading”. For a company with a genuine underlying transaction, hedging serves the opposite purpose: it reduces uncertainty.

If an operating contract earns an 8% margin while currency moves can alter input cost by 10%, management may effectively be carrying a larger currency bet than the commercial margin itself.

The LCT framework retains the principle that relevant FX transactions are supported by underlying transactions.[2]

Counterparties Need to Participate

The framework will not grow solely because banks offer it. Suppliers and customers also need to agree on the currency used in contracts and payments.

Companies can begin with Singapore counterparties that represent meaningful recurring volume. Discuss invoicing preferences, settlement, pricing and whether SGD or Rupiah creates a better result for both sides.

Neither USD nor local currency should be assumed to be universally superior.

Intra-Group Treasury Is Another Use Case

The rules also cover qualifying intra-group lending within the direct-investment framework.[2] Groups with Indonesian and Singapore entities may therefore find LCT relevant to project funding, treasury centralisation and intercompany cash flows.

Currency flexibility does not remove tax, transfer-pricing, legal or accounting obligations. Those still need separate treatment.

Who May Benefit Most?

Recurring importers and exporters are obvious candidates. Companies already invoicing in SGD, or groups with two-way Singapore cash flows, may have even stronger use cases.

The value tends to increase where companies can combine direct settlement with natural hedges and predictable treasury patterns. For small, infrequent transactions, operational simplicity may matter more than currency optimisation.

Five Questions for CFOs

Before adopting LCT, CFOs should ask: What are the underlying revenue and cost currencies? Is the all-in IDR–SGD route more efficient than a USD route? Is there a natural hedge? Do liquidity and settlement dates align? And does the benefit justify the added operational complexity?

If those answers are clear, LCT can be a useful treasury tool. If they are not, USD remains a valid option.

Optionality Is the Real Change

The Indonesia–Singapore LCT framework gives treasury teams something valuable: optionality.

Companies no longer need to assume that every bilateral transaction must follow a USD route simply because that is the historical default. They can compare local-currency settlement against the alternative and choose based on economics.

The framework does not remove foreign-exchange risk. It gives companies a chance to define that risk more closely around the actual currencies of their commercial relationships.

For corporate treasury, that may be the most important change of all.